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TMI Blog2007 (8) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... affirming the decrees of the trial court. Four Second Appeals filed by the appellants in the High Court of Karnataka met with the same fate. These Appeals by Special Leave thus challenge the decrees granted in the four suits. 2. The State of Karnataka every year auctions the right to vend liquor in various taluks of the State. Among them is included trade in arrack. The plaintiffs in the suits, Excise Contractors on their own showing, had bid the right to vend liquor from the concerned taluks earlier and even for the Excise Year 1989-90. On 16.3.1990, the Minister of Finance, Government of Karnataka, during his Budget Speech in the Assembly, made the following statement. The State has been following a policy of banning the sale of toddy in a phased manner. At present, the sale of toddy has been banned in seven districts. I propose to extend the ban to the entire State with effect from 1.7.1990. The expected loss in revenue is ₹ 60 crores. It is hoped that a portion of this loss would be made good by higher arrack rentals and better enforcement of rules and regulations. The Budget Speech was marked Exhibit P-1 in the suits which were jointly tried. According to the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of rentals bid for the year 1990-91, but to collect it only at the rates of the bid amount for the Excise Year 1989-90. A learned single judge of the High Court dismissed the Writ Petitions. An appeal was filed by the plaintiffs before a Division Bench. A case of promissory estoppel was also put forward against the Government in support of the prayers in the Writ Petitions. The Division Bench noticed that what was complained of was nothing more than hazardness of any business. On the plea of promissory estoppel put forward, the Division Bench stated : The promissory estoppel cannot arise because where it is a matter of policy, and Government of Karnataka by filing statement of objections has stated that it has been doing whatever is possible within its means to stop the illegal trade. At the prayers of the plaintiffs, the attempted termination of the contract by the State was restrained for a specific period by the court directing the State not to give effect to the proposed termination of the contract until 30.9.1990. The matter was brought up to this Court by way of Petitions for Special Leave to Appeal. This Court by Exhibit P-29 Order dismissed the petitions thus: W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... announcement to ban toddy. Under the circumstances already explained above and as the said circumstances have been totally changed, it is unfair to claim the said amount from the plaintiff by the defendants who are the defaulting parties. Then follows the plea that in view of the developments, performance could not be insisted upon. This is what is pleaded in paragraph 11 of the plaint: In any view of the case and irrespective of the aforesaid aspects of fundamental breach, the plaintiff submits that the purpose of the obligation to sell liquor has been rendered impossible to the extent expected consequent upon the illegal tapping and sale of toddy which the plaintiff could not prevent and which the defendants did not prevent though they were obliged to do so. Therefore, there is supervening impossibility of performance of contract to sell liquor and to pay higher kist amount, realisation of which is rendered impossible by the breach of promise held out by the defendants as well as their failure and negligence to maintain law and order. Therefore, the plaintiff is excused from the obligation to perform as per contract for sale of liquor in the taluks for which the plaintiff i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts which compelled the Government not to ban altogether the sale of toddy and making the new arrangement, were all set out. The plaintiffs were aware of the fact of attempts to defy the ban by toddy tappers and they had entered into the contract thereafter with eyes open. Even at the time the plaintiffs bid, the agitation by toddy tappers was going on. The plaintiffs were bound by the terms of the contract and to perform their obligations. It was further submitted that, as a matter of fact, the tapping of toddy for sale to the public was banned, but illegal tapping was going on and the Excise Department was trying its best to prevent illegal tapping. The plaintiffs were bound to pay the amount which was the consideration for the right to vend arrack obtained by them from the Government which had the exclusive privilege of selling liquor. The dismissal of the Writ Petition, the appeal therefrom and of the Petitions for Special Leave to Appeal were pleaded. It was pleaded that the sale of arrack was not dependent on the tapping of toddy or sale of toddy. It was pleaded that the Government has the right to change its policy with regard to the banning of tapping of toddy and the bann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt proceeded on the same lines and dismissed the appeals. It does not appear that the lower appellate court properly applied its mind to the pleadings and the principles of law governing the matter. On Second Appeals being filed by the defendants, the High Court, we must say with respect, did not properly apply its mind to the questions that arose for decision and merely ended up by dismissing the Second Appeals upholding what it called the plea of promissory estoppel. The decisions thus rendered in the four suits are challenged in these appeals. 8. The following decree has been granted. It is hereby declared that the Excise contract existing between plaintiffs and first defendant is enforceable by rectification to the effect that monthly kist payable shall be at the rate prevailing during excise year 1989-90. Further the defendants are restrained from giving effect to or enforcing the terms of contract entered into between the plaintiffs and the defendants in relation to the retail vend of liquor in Karkala, Bantwal, Puttur, Sullia, Kundapura, Udupi and Belthangady Taluks of Dakshina Kannada District for the excise year 1990-91 with regard to the kist amount payable thereu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Government order. P.W. 1 examined on behalf of the plaintiffs could not show with reference to any accounts of any such loss having been incurred. We are not here considering the question of the plaintiffs having shown detriment in connection with their plea of estoppel which will be dealt with separately. What is intended to be conveyed here is that the plaintiffs have not shown that they had suffered any detriment by entering into the contracts in question based on the promise held out to them, though not reflected in the written instrument. 11. The American Supreme Court in Hunt Vs. Rousmanier s Administrators [8 Wheaton 174) speaking through Chief Justice Marshall indicated the position in law thus: It is a general rule, that an agreement in writing, or an instrument carrying an agreement into execution, shall not be varied by parol testimony, stating conversations or circumstances anterior to the written instrument. This rule is recognised in courts of equity as well as in courts of law; but courts of equity grant relief in cases of fraud and mistake, which cannot be obtained in courts of law. In such cases, a court of equity may carry the intention of the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... totally unwarranted and clearly unsustainable in law. That part of the decree has necessarily to be set aside. 14. What is left is the case of promissory estoppel. Here, the promise is said to be the budgetary speech of the Minister concerned that he proposes to ban the sale of toddy to the public in the District of Dakshina Kannada. Firstly, the Division Bench in the Writ Petitions filed by some of the plaintiffs, while dismissing them, clearly held that no question of promissory estoppel would arise in these cases. The Petition for Special Leave to Appeal challenging the said decision was dismissed by this Court reserving liberty in the plaintiffs to approach the Civil Court. The question arises, to approach the Civil Court for what? According to us, the approach to the Civil Court is for the purpose of suing for damages on establishing that they had suffered loss because of the expectations raised by the speech in the Assembly and the failure of the State to enforce the prohibition it had envisaged as a policy. The right reserved for approaching the Civil Court even while dismissing the Petition for Special Leave to Appeal, does not clothe the plaintiffs with a right to appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiffs are all experienced Excise contractors who are bidding for the right to vend liquor at open auctions. It is notorious that these auctions are highly competitive and every attempt is made by an existing contractor to preserve his bastion. It is also notorious that the prices fetched in these auctions show a tendency to go up because of competition. The State has pointed out that the increase in the figures for various other centres even exceeded by 300% the amounts for the year 1989-90. There is nothing to show that the bids by the plaintiffs were not based on their calculations and with a view to ward off competition to preserve their right to vend arrack in their respective areas. 19. What the plaintiffs have gone for was a commercial venture with attendant risks. If they felt that the risk could not be taken, it was for him to repudiate the contract as a whole. In fact, when the Government apparently tried to terminate the contracts because of the failure of the plaintiffs to remit the Kist amounts as agreed to for the months of July and August 1990, the plaintiffs obtained interim orders from the High Court interdicting such termination and went ahead with vending arra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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